Investors bankrolled Potgieter’s lavish lifestyle

THE founder and Chief Executive Officer of the Prowealth group of companies, Riaan Potgieter, used tens of millions of Namibia dollars belonging to Prowealth investors to finance his own lifestyle, a firm of auditors that was asked to investigate the financial affairs of Potgieter and a key company in the Prowealth group has reported to the Namibia Financial Institutions Supervisory Authority.

More than N$22,4 million that appears to have been investors’ money was deposited into personal bank accounts of Potgieter, a firm of public accountants and auditors, Grand Namibia, has found in a preliminary report on Potgieter and Prowealth Asset Managers that has been filed with the High Court.The firm reported that Prowealth Asset Managers, of which Potgieter was the sole shareholder, stole N$49 million from investors. This money was used to pay the expenses of Potgieter and other companies in which he had a stake, according to the firm.Potgieter died in Windhoek on December 8 last year. He was found in his home with an apparently self-inflicted gunshot wound to the head. He died a month before his fortieth birthday.Prowealth Asset Managers has been placed in the hands of a liquidator, after the company was declared bankrupt by the High Court near the end of March.The report by Grand Namibia has been filed with the High Court by lawyers representing Namfisa in a case in which the financial sector regulator is trying to prevent insurance policies on Potgieter’s life from being paid out to Potgieter’s former wife, Louise Potgieter. The proceeds on those policies amount to about N$15,6 million.A ruling in that case is set to be given by Acting Judge Theo Frank tomorrow.In the latest affidavit that has been filed with the High Court in support of Namfisa’s attempt to stop the payment of the policy proceeds to Mrs Potgieter, the Acting Chief Executive Officer of Namfisa, Lily Brandt, told the court that according to Grand Namibia’s preliminary report on his investigation Potgieter and companies under his control ‘misappropriated a substantial portion of the investment funds placed in their hands, in order to defray the personal expenses of (Potgieter) and those companies under his care and administration’.Brandt charged that it is clear that Potgieter did not use his personal resources to pay the premiums on the policies on his life, but that the premiums were paid with investors’ money. ‘(I)t is clear that (Potgieter) and (Prowealth Asset Managers) have committed fraud on a wide scale,’ Brand claimed in her affidavit. ‘They have also perpetrated widespread theft of investors’ funds. Their unlawful conduct has prejudiced mainly the innocent investors, and also (Namfisa) as the regulator of the financial services industry in Namibia.’According to Grand Namibia’s report, claims against Prowealth Asset Management that total a little over N$91 million have been submitted to liquidator Alwyn van Straten, who is in charge of the liquidation of the company and an associated company in the Prowealth group, Prowealth Consult. The firm states in its report that in its opinion a claim of N$16,294 million by Prowealth Group Holdings against Prowealth Asset Managers is not a valid claim, as the holding company did not provide any loans to its subsidiary.This leaves more than N$74,7 million in claims from investors having been submitted to the liquidator.Theron reported that from an examination of the bank accounts of Potgieter it appears that he did not receive a monthly salary.’Funds were transferred to his personal accounts from Prowealth Asset Managers on a random basis,’ the auditors stated in their report. ‘It appears that these transfers were done as and when it was needed to reduce the overdraft balance of his account for a specific month. It appears that these funds transferred relate to investors funds.’Grand Namibia concluded that the more than N$22,4 million in investors’ money that was paid into Potgieter’s bank accounts was used to pay various of Potgieter’s personal expenses. This includes N$983 038 that was paid for premiums on insurance policies on Potgieter’s life, cash withdrawals of over N$1,15 million, more than N$1,2 million that was paid for the lease of vehicles, N$847 168 that was paid on a Mastercard account of Potgieter, and N$2 250 343 that was paid on a Diners Club account of Potgieter for hotel, travel and other expenses.Grand Namibia found that investors’ money was not kept separate from other money being handled by Prowealth Asset Managers. Close to N$68,9 million that investors entrusted to the company was deposited directly into a current bank account of Prowealth Asset Managers, instead of being kept in a trust account as required, the firm reported.Various transfers of money were made from Prowealth Asset Managers’ account to other companies in which Potgieter had a stake. This includes more than N$18,3 million that was transferred to Prowealth Consult, which is ‘not an approved asset manager and was therefore not authorised to accept money from clients for investment purposes’, according to the report.In total, more than N$30,69 million of investors’ money went to Prowealth Consult instead of being invested, Grand Namibia reported. This money was used to finance the working capital requirements of Prowealth Consult, the firm reported.The auditors further found that investors’ money was not invested in any investment instrument. Fake statements reflecting the status of investors’ investments were however provided to Prowealth Asset Managers’ clients, it was also found.In the report it is stated: ‘Investors did not receive any financial returns on their investments such as interest or dividends or any unrealised gains as the funds were not invested in any investment instrument such as unit trust, equity, money market instruments or interest bearing loans.’The auditors reported that Prowealth Asset Managers ‘has not fulfilled any of the duties imposed on it with regard to the maintenance of proper accounting records’.For three years – the financial years ending February 28 2006, 2007 and 2008 – Prowealth Asset Managers also failed to lodge its audited financial statements with Namfisa, the auditors found.In a previous affidavit filed with the High Court Brandt told the court that since Namfisa registered Prowealth Asset Managers as an asset management company in August 2001, when it also approved Potgieter as the portfolio manager for the company, Namfisa had no reason to suspect any irregularities in the business of the company. As a result, it did not have any reason to investigate the company’s affairs either, according to Brandt.She stated that Prowealth Asset Managers always submitted the required quarterly reports and levies returns required by Namfisa, and no complaints by any person who had placed an investment with the company had been brought to Namfisa’s attention.